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**SECURITIES      AND EXCHANGE COMMISSION**

**Washington,      D.C.  20549**

**FORM      10-KSB**

**June 30, 2007**

** 0-11582**

**AUTO      UNDERWRITERS OF AMERICA, INC.**

| **California**(State                or Other Jurisdiction ofIncorporation                or Organization) |        | **94-2915849**(I.R.S.                Employer Identification Number) |
|-----------------------------------------------------------------------------------------------------------|--------------------------------------|----------------------------------------------------------------------|

**2670      South White Road, Suite 241**

**San      Jose, CA 95148**

**(650) 745-3264**

**None**

**Common      Stock, no par value**

| **Documents                Incorporated By Reference:****None** |
|-----------------------------------------------------------------|

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| **AUTO                UNDERWRITERS OF AMERICA, INC.** **TABLE                OF CONTENTS** |
|-------------------------------------------------------------------------------------------------|

| **PART                I**                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     | **Page No.** |
|--------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|-------------------|
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                1.                                                                                       | Description                of Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 3                 |
|                                                                                                         | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                2.                                                                                       | Description                of Property                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 14                |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                3.                                                                                       | Legal                Proceedings                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 14                |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                4.                                                                                       | Submission                of Matters to a Vote of Security                Holders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 14                |
|                    | **                                                                                                                                      ** |              |
| **PART II**                                                                                             |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |              |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                5.                                                                                       | Market                for Common Equity, Related Stockholder Matters and                Small Business Issuer Purchases of Equity Securities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 15                |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                6.                                                                                       | Management’s                Discussion and Analysis of Financial Condition                And Results of Operations                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | 16                |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                7.                                                                                       | Financial                Statements                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      | 19                |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                8.                                                                                       | Change                in and Disagreements with Accountants on Accounting                and Financial Disclosure                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | 19                |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                8A.                                                                                      | Controls                and Procedures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   | 19                |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                8B.                                                                                      | Other                Information                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 19                |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| **PART                III**                                                                                  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |              |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                9.                                                                                       | Directors                and Executive Officers of the                Registrant                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         | 20                |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                10.                                                                                      | Executive                Compensation                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 22                |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                11.                                                                                      | Security                Ownership of Certain Beneficial Owners and                Management and Related Stockholder Matters                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 24                |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                12.                                                                                      | Certain                Relationships and Related                Transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | 24                |
|                                                                           | **       **                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |              |
| Item                13.                                                                                      | Exhibits                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | 24                |
|                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |              |
| Item                14.                                                                                      | Principal                Accountant Fees and Services                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | 26                |
|                                                                                                         |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |              |
|                                                                                                         | Signatures                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               | 27                |

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**Special      Note Regarding Forward Looking Statements**

| **Part                I** |
|---------------------------|

**Item      1.  Description of Business**

*Business      Summary*

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*Operational      Focus and Acquisition Strategy*

*The      Automotive Finance Industry*

*The      Non-Prime Market*

*Specialty      Retailing and Direct Lending*

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*Indirect      Lending*

|         | •      | A                tangible net worth of $100,000 (exclusive of goodwill or other intangible                assets), or a parent or affiliate which meets the net worth criteria                and                guarantees the performance of the obligation of the automobile dealer                under the purchase agreements, replacement guarantees or other forms                of                dealer recourse. |
|--------------------------------------------|---------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | •      | Possess                acceptable accounts payable history.                                                                                                                                                                                                                                                                                                                                                                  |
|         | •      | Possess                acceptable personal credit history.                                                                                                                                                                                                                                                                                                                                                                   |
|         | •      | Verifiable                banking references.                                                                                                                                                                                                                                                                                                                                                                                |
|         | •      | Possess                acceptable mortgage or landlord references.                                                                                                                                                                                                                                                                                                                                                           |
|         | •      | Possess                a current Department of Motor Vehicle automobile dealer                license.                                                                                                                                                                                                                                                                                                                       |

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|         | •      | The                purchase discount from the face amount of the loan will generally                range                between 5% and 12% depending on the creditworthiness of each individual                borrower;                            |
|--------------------------------------------|---------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | •      | Contracts                must have an original term of 60 months or less;                                                                                                                                                                            |
|         | •      | The                age of the financed vehicle may not exceed eight years;                                                                                                                                                                           |
|         | •      | The                borrowers on the contracts are required to make a down payment in                cash                plus a net trade-in allowance of a minimum 10% of the purchase price                of                the financed vehicles; |
|         | •      | The                interest rate on the contract will not violate any applicable usury                laws;                                                                                                                                          |
|         | •      | No                contract may be in arrears at the time of purchase; and                                                                                                                                                                            |
|         | •      | We                maintain first payment recourse on all non-franchise                dealers.                                                                                                                                                       |

|         | •      | A                dealer path allows automobile dealers to enter consumer credit                applications online and obtain instant credit decisions and deal                structures for our purchase of contracts.  This path also enables                dealers to enter existing deal structures and obtain instant pricing                for                our purchase of existing contracts.  As described above,                participating dealers must first register to use the website and                enter                into a dealer agreement before we will receive any applications from                the                dealer.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |
|--------------------------------------------|---------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | •      | A                consumer path allows a consumer to complete an online credit application                and receive an instant credit decision, print loan documentation                and a                list of automobile dealers in the area that we have pre-approved.                 The printed loan documentation is intended to be used as evidence                of a                pre-approved lending arrangement between the consumer and us, thereby                making it easier for the consumer to purchase and finance a vehicle.                 When the consumer presents the certificate to a participating dealer,                the                dealer must enter the certificate number into the specified field                through                the dealer path on the website, as well as enter the required information                concerning the vehicle to be purchased and the contract structure.                 We then verify that the vehicle information and contract structure                are                acceptable and gives final approval to the                transaction. |

|         | •      | *Instant                Credit Decisions*.   The website provides dealers and                consumers with online credit decisions within thirty seconds after                an                online application is submitted.  Upon receipt of a loan package from                a pre-approved dealer, we verify the loan documentation sent by the                dealer                to ensure the loan and the borrower satisfy our internal criteria                for                financing.  Our verification process normally is completed within                three days of the receipt of the loan documentation.  We believe the                speed at which dealers and consumers can receive a credit decision                for the                financing will encourage dealers and consumers to use our                website.                                                          |
|--------------------------------------------|---------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | •      | *Automatic                Deal Structures*.   Dealers have the option of (i)                entering financing deals they have already structured and we will                give the                dealer a decision on whether we will finance the deal, or (ii) we                will                process the application and provide the dealer a conditional approval                with                the maximum contract limits that will enable us to purchase the                contract.                                                                                                                                                                                                                                                                                                                                                                                                                                |
|         | •      | *Decisions                24 hours a day/7days a week/365 days a year*.   The                website allows for applications to be submitted 24 hours a day, 7                days a                week.  Many automobile sales take place in the evenings and on the                weekends when financial institutions are closed.  Many finance                companies are only open Monday through Friday from 9am to 5pm.  The                website provides instant decisions during these peak evening and                weekend                hours.  This instant decision process helps increase dealer                sales and helps reduce dealer “roll-backs” which occur when a dealer                finances a vehicle and is later forced to reclaim the vehicle because                the                dealer is unable to sell the financing                structure. |

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*Monitoring      and Enforcement of Contracts*

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*Consumer      Credit Characteristics*

|         | •      | “A”                credit consumer is a prime consumer who has a long credit history                with no                defaults, has been employed in the same job for a period of at least                18                months, and can easily finance a new car purchase through a bank,                a                captive finance subsidiary of an automobile manufacturer or an independent                finance company that focuses on prime consumer credit.                                                                                            |
|--------------------------------------------|---------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | •      | “B”                credit consumer is a non-prime consumer who may have had some slight                credit problems in his or her past or may not have been employed                at his or                her current job for 18 months.  To finance a new or late-model used                car, the “B” credit borrower may not qualify for a loan from a captive                finance subsidiary, but may have success borrowing from a bank and                can                access credit through an independent finance company.           |
|         | •      | “C”                credit consumer is a non-prime consumer who may have had an inconsistent                employment record or a non-recurring event that has caused problems                with                credit in the past.  To finance a late-model or older used car                purchase, this borrower will generally not be able to obtain a loan                from a                captive finance subsidiary or a bank, and will have to access an                independent finance company that lends into this market                category. |
|         | •      | “D”                credit consumer is a non-prime consumer who has an unfavorable employment                history and serious credit problems, such as a personal bankruptcy.                 This borrower’s only choice is to finance his or her used car purchase                through an independent finance company that is active in this market                segment.                                                                                                                                                                                  |

*Competition*

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*Regulation*

|         | •      | *State                Licensing Requirements*. We maintain a Sales Finance Company License                as well as consumer loan licenses in states that require                them.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
|--------------------------------------------|---------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|         | •      | *Fair                Debt Collection Act*. The Fair Debt Collection Act and applicable                state law counterparts prohibits us from contacting customers during                certain times and at certain places, from using certain threatening                practices and from making false implications when attempting to collect                a                debt.                                                                                                                                                                                                                                                                                                                                                                                                                                  |
|         | •      | *Truth                in Lending Act*. The Truth in Lending Act requires us and the dealers                we do business with to make certain disclosures to customers, including                the terms of repayment, the total finance charge and the annual percentage                rate charged on each contract or direct loan.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|         | •      | *Equal                Credit Opportunity Act*. The Equal Credit Opportunity Act prohibits                creditors from discriminating against loan applicants on the basis                of                race, color, sex, age or marital status. Pursuant to Regulation B                promulgated under the Equal Credit Opportunity Act, creditors are                required                to make certain disclosures regarding consumer rights and advise                consumers                whose credit applications are not approved of the reason for the                rejection.                                                                                                                                                                                                                  |
|         | •      | *Fair                Credit Reporting Act*. The Fair Credit Reporting Act requires us to                provide certain information to consumers whose credit applications                are not                approved on the basis of a report obtained from a consumer-reporting                agency;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|         | •      | *Gramm-Leach-Bliley                Act*. The Gramm-Leach-Blailey Act requires us to maintain privacy                with                respect to certain consumer data in our possession and to periodically                communicate with consumers on privacy matters.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |
|         | •      | *Soldiers’                and Sailors’ Civil Relief Act*. The Soldiers’ and Sailors’ Civil                Relief Act requires us to reduce the interest rate charged on each                loan to                customers who have subsequently joined, enlisted, been inducted or                called                to active military duty.                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
|         | •      | *Electronic                Funds Transfer Act*. The Electronic Funds Transfer Act prohibits us                from requiring our customers to repay a loan or other credit by electronic                funds transfer (“EFT”).  We are also required to provide certain                documentation to our customers when an EFT is initiated and to provide                certain notifications to our customers with regard to preauthorized                payments.                                                                                                                                                                                                                                                                                                                            |
|         | •      | *Telephone                Consumer Protection Act*. The Telephone Consumer Protection Act                prohibits telephone solicitation calls to a customer’s home before 8 a.m.                or after 9 p.m. In addition, if we make a telephone solicitation                call to a                customer’s home, the representative making the call must provide his or                her name, our name, and telephone number or address at which our                representative may be contacted. The Telephone Consumer Protection                Act                also requires that we maintain a record of any requests by customers                not                to receive future telephone solicitations, which must be maintained                for                five years. |
|         | •      | *Bankruptcy*.                Federal bankruptcy and related state laws may interfere with or affect                our                ability to recover collateral or enforce a deficiency                judgment.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |

*Employees*

*Risk      Factors*

*Limited      Assets and Operating      History. *

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*Ability      to Manage Growth; Risks      Associated with Expansion and Changes in Business. *

*Unseasoned      Loan      Portfolio.*

*High      Leverage. *

*Substantial      Need for Additional      Capital. *

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*Sensitivity      to Interest      Rates. *

*Fluctuations      in Operating      Results. *

*Business      Cycle. *

*Potential      Adverse Effect of      Economic Slowdown.  *

*Geographic      Concentration*

*Sourcing      Used Cars. *

*Environmental      Risks.  *

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*Creditworthiness      of Contract      Obligors. *

*Network      Infrastructure and Computer      Systems May Fail*

*We      Must Maintain      Confidentiality*

*Competition      and Market      Conditions. *

*Performance      Dependent on Executive      Officers*

*Acquisitions      Could Be Difficult to      Integrate, Disrupt Business, Dilute Shareholder Value, and Adversely Affect      Our      Operations.  *

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*Dilution      of Shareholder Ownership      Interest. *

*Extensive      Regulatory      Requirements. *

*Failure      to maintain effective      internal controls in accordance with Section 404 of the Sarbanes-Oxley Act      of      2002 could have a material adverse effect on the market’s perception of our      business and our ability to raise capital.*

*OTC      Bulletin Board. *

*Financial      Reporting      Experience.*

*Limited      Access to the OTC Bulletin      Board Service.*

*Penny      Stock Rules.*

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*No      Dividends.*

**Item      2.  Description of Properties**

~~800~~

|         | •      | 5715                N Freeway, Houston, Texas 77076, lease expires October 31, 2009,                payments $9,293                  |
|--------------------------------------------|---------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------|
|         | •      | 9175                Gulf Freeway, Houston, Texas 77017, lease expires September 30, 2008,                payments $5,500             |
|         | •      | 8555                Beechnut, Houston, Texas 77036, lease expires June 30, 2010, payments                $6,000                      |
|                                       | •                               | 3451                Ella Boulevard, Houston, Texas 77018, lease expires January 31st,                2009,                payments $2,600 |

**Item      3.  Legal Proceedings**

**Item      4.  Submission of Matters to Vote of Security      Holders**

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| **Part                II** |
|----------------------------|

**Item      5.  Market for Common Equity, Dividends, Related      Stockholder Matters and Small Business Issuer Purchases of Equity      Securities**

*Market      Information*

|                                                |   | **High** |   |   | **Low** |   |
|-----------------------------------------------------|--------|----------|--------|--------|---------|--------|
| Fiscal                  2006                        |   |     |   |   |    |   |
| April                  1, 2006 through June 30,2006 |   | $        | 3.50   |   |    | $      | 1.80 |   |
|                                                |   |     |   |   |    |   |   |   |
| Fiscal                  2007                        |   |     |   |   |    |   |   |   |
| July                  1, 2006 through June 30, 2007 |   | $        | 5.00   |   |    | $      | 1.00 |   |

*Holders*

*Dividends*

*Securities      Authorized for Issuance Under Equity Compensation Plans*

|                                                                                               |   | **Number of securities****to                be issued upon****exercise                of options,****warrants and rights** |    |   | **Weighted-average****exercise                price****of options, warrants,****and rights** |   |   | **Number of securities****remaining                for future issuance** |   |
|----------------------------------------------------------------------------------------------------|--------|------------------------------------------------------------------------------------------------------------------------------------------------|---------|--------|-------------------------------------------------------------------------------------------------------------|--------|--------|------------------------------------------------------------------------------------|--------|
|                                                                                               |   |                                                                                                                                           |    |   |                                                                                                        |   |   |                                                                               |   |
| Equity                compensation plans approved                by security holders          |   |                                                                                                                                           | 150,000 |   |                                                                                                        | $      | 1.83   |                                                                               |   |   | 300,000 |   |
| Equity                compensation plans not                approved by security holders |   |                                                                                                                                           | --      |   |                                                                                                        |   | --     |                                                                               |   |   | -- |   |
| Totals                                                                                             |   |                                                                                                                                           | 150,000 |   |                                                                                                        | $      | 1.83   |                                                                               |   |   | 300,000 |   |

*Recent      Sale of Unregistered Securities*

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**Item      6.  Management’s Discussion and Analysis of      Financial Condition and Results of Operations**

|         | •      | The                creditworthiness of contract obligors;                                                |
|--------------------------------------------|---------------------------------------|----------------------------------------------------------------------------------------------------------|
|         | •      | Economic                factors affecting delinquencies;                                                 |
|         | •      | Our                ability to retain and attract experienced and knowledgeable                personnel; |
|         | •      | Our                ability to purchase contracts; and                                                    |
|         | •      | Our                ability to compete in the consumer finance                industry.                   |

**Business      Overview**

~~three~~

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|         | •      | Our                ability to procure suitable lot locations at reasonable                costs.               |
|--------------------------------------------|---------------------------------------|----------------------------------------------------------------------------------------------------------------|
|         | •      | Our                ability to build our management strength to support the store                growth.        |
|         | •      | Our                ability to maintain competitive direct retail and direct lending                operations. |

**Critical      Accounting Policies**

*Revenue      Recognition*

*Allowance      for Losses on Loans*

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**Results      of Operation**

| 2007                vs 2006           |
|---------------------------------------|
| (amounts                in thousands) |

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**Liquidity      and Capital      Resources**

**Item      7.  Financial Statements**

**Item      8.  Changes in and Disagreements with Accountants      on Accounting and Financial Disclosure**

**Item      8A.  Controls and Procedures**

**Item      8B.  Other Information**

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| **PART                III** |
|-----------------------------|

**Item      9.  Directors and Executive Officers of the      Registrant**

| **Name**                                                                                                                                                                                                                                                                                                           |   | ** Age ** | **     ** | **Position                with the Company**                                                                                                                                                                                                                                                                                                                                               |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------|------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                                                     |   |                |                               |                                                                 |
| Dean                Antonis                                                                                                                                                                                                                                                                                        |   | 45                  |                               | President,                Treasurer and Director                                                                                                                                                                                                                                                                                                                                           |
| William                J. Kellagher                                                                                                                                                                                                                                                                                |   | 49                  |                               | Executive                Vice President and Director                                                                                                                                                                                                                                                                                                                                       |
| Michele                H. Clark                                                                                                                                                                                                                                                                                    |   | 46                  |                               | Secretary                and Director                                                                                                                                                                                                                                                                                                                                                      |

**Dean      Antonis**

**William      J.      Kellagher **

**Michele      Clark**

**Family      Relationships**

**Involvement      in certain legal proceedings**

**Board      of Directors**

**Committees**

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**Section      16(a) Beneficial Ownership Reporting Compliance**

**Code      of Ethics**

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**Item10.  Executive      and Director Compensation and      Analysis**

| SUMMARY                COMPENSATION TABLE                                                                         |
|-------------------------------------------------------------------------------------------------------------------|
|                                                                                                              |
| (a)NameAndPrincipalPosition                                                                                       | (b)YearJune 30, | (c)Salary(1)($) | (d)Bonus($) | (e)StockAwards($)(1) | (f)OptionsAwards(#)(1) | (g)Non-EquityIncentive                PlanCompensation($) | (h)NonqualifiedDeferredCompensationEarnings($) | (i)AllOtherCompen-sation($) | (j)Total($) |
|                                                                                          |       |       |       |       |       |       |       |   |       |
| Dean                Antonis President,                Treasurer and                Director             | 200720062005 | $66,800$63,500$67,000 | --- | --$375,000 | --- | --- | --- | --- | $66,800$63,500$442,000 |
|                                                                                          |       |       |       |       |       |       |       |       |
| William                J. Kellagher Executive                Vice President                and Director | 200720062005 | $159,452$145,600- | --- | --$375,000 | --- | --- | --- | --- | $159,452$145,600$375,000 |
|                                                                                          |       |       |       |       |       |       |       |       |
| Michele                H. Clark Secretary                and Director                                   | 200720062005 | $75,000$75,000$37,500 | --- | --- | 100,000-- | --- | --- | --- | $75,000$75,000$37,500 |
|                                                                                                              |   |   |   |   |   |   |   |   |

| (1) | On                June 29, 2005, we issued a total of 2,155,000 shares of common stock                and 50,000 options to purchase common stock at $.50 per share to                our                officers, directors and certain other employees as compensation for                their                efforts in developing our business operations.  Our board of                directors valued the shares at $.50 per share.  In April 2007,                Michele H. Clark was issued 100,000 options to purchase common stock                at                $2.50 per share. The options to purchase our common stock were granted                pursuant to our 2004 Stock Option Plan and are exercisable for a                period of                10 years. The securities were offered and sold pursuant to an exemption                from the registration requirements provided by Section 4(2) of the                Securities Act of 1933, as amended. |
|-----|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**Stock      Options**

**2004      Stock Option Plan**

**Description      of the 2004 Plan**

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**Stock      Options Granted to Executive Officers during Last Fiscal      Year**

|     **Name****(a)** | **Number                of Secu-****rities                Underlying****Options/SARs****Granted****(#)****(b)** | **Percent                Of Total****Options/SARs****Granted                To****Employees                In****Fiscal                Year****(c)** |   **Exercise                Of****Base                Price****($/Sh)****(d)** |    **Expiration****Date****(e)** |
|-----------------------------------------|-----------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------|-------------------------------------------------|
|                                    |
| Dean                Antonis             | 0                                                                                                               | 0%                                                                                                                                                   | $0                                                                                       | 0                                               |
| William                J. Kellagher     | 0                                                                                                               | 0%                                                                                                                                                   | $0                                                                                       | 0                                               |
| Michele                H. Clark         | 100,000                                                                                                         | 100%                                                                                                                                                 | $2.50                                                                                    | 2017                                            |

**Aggregated      Option Exercises in Last Fiscal Year and Fiscal Year End Option      Values**

| **Name**                            | **Shares****Acquired****On                Exercise** | **Value                Realized** | **Exercisable/****Unexercisable****(A)** | **Exercisable/****Unexercisable****(B)** |
|-------------------------------------|------------------------------------------------------|-----------------------------------|------------------------------------------|------------------------------------------|
|                                |
| Dean                Antonis         | 0                                                    | $                0                | 0                                        | $0                                       |
| William                J. Kellagher | 0                                                    | $                0                | 0                                        | $0                                       |
| Michele                H. Clark     | 0                                                    | $                0                | 100,000/0                                | $0                                       |

| (A)   | Number                of Unexercised Securities Underlying Options/SAR’s at fiscal year                end |
|-----------------|------------------------------------------------------------------------------------------------------------------|

| (B)   |  Value                of Unexercised In-The-Money at fiscal year                end |
|-----------------|------------------------------------------------------------------------------------------|

**Director’s      Compensation**

----

**Item      11.  Security Ownership of Certain Beneficial      Owners and Management and Related Stockholder Matters**

|   **Title                Of Class** | **Name                and Address of Beneficial Owner** | **     ** | **Amount                and****Nature                of Beneficial****Ownership** | **     ** | **Percentage                of Common****Stock                Outstanding** |
|-----------------------------------------------|---------------------------------------------------------|------------------------------------|-----------------------------------------------------------------------------------|------------------------------------|-----------------------------------------------------------------------------|
|                                          |                                                    |                               |                                                                              |                               |                                                                        |
| Common                Stock                   | Lawrence                E. Gunnels                      |                               | 650,000                                                                           |                               | 10.8%                                                                       |
| Common                Stock                   | Timothy                Hassell                          |                               | 663,480                                                                           |                               | 11.0%                                                                       |

| **Title                of Class** | **Name                of Beneficial Owner**                                          | **     ** | **Amount                and****Nature                of Beneficial****Ownership(1)** | **     ** | **Percentage                of Common****Stock                Outstanding** |
|-----------------------------------|--------------------------------------------------------------------------------------|------------------------------------|--------------------------------------------------------------------------------------|------------------------------------|-----------------------------------------------------------------------------|
|                              |                                                                                 |                               |                                                                                 |                               |                                                                        |
| Common                Stock       | Dean                Antonis                                                          |                               | 787,936                                                                              |                               | 11.2%                                                                       |
| Common                Stock       | William                J. Kellagher                                                  |                               | 750,000                                                                              |                               | 10.7%                                                                       |
| Common                Stock       | Michele                H. Clark                                                      |                               | 100,000                                                                              |                               | 1.4%                                                                        |
| Common                Stock       | All                officers and directors as a group (3)                persons |                               | 1,637,936                                                                            |                               | 23.26%                                                                      |

| *   | Indicates                less than 1%                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
|-----|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (1) | Calculated                pursuant to Rule 13d-3(d) of the Securities Exchange Act of                1934.  Unless otherwise stated below, each such person has sole                voting and investment power with respect to all such shares. Under                Rule                13d-3(d), shares not outstanding that are subject to options, warrants,                rights or conversion privileges exercisable within 60 days are deemed                outstanding for the purpose of calculating the number and percentage                owned                by such person, but are not deemed outstanding for the purpose of                calculating the number and percentage owned by each other person                listed. |
| (2) | Includes                100,000 shares granted to Ms. Clark, our secretary and one of our                directors, pursuant to the 2004 Stock Option Plan.  The options                are exercisable at $2.50 per share and expire April,                2017.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

**Changes      in Control**

**Securities      Authorized for Issuance Under Equity Compensation Plans**

**Item      12.  Certain Relationships and Related      Transactions**

**Item      13.  Exhibits**

| (a)                                                     | Exhibits: |                                                                                                                               |
|--------------------------------------------------------------------------------------------|-----------|-------------------------------------------------------------------------------------------------------------------------------------------------------------|
|                 |      |                                                                                                                                                        |
|                 | 3.1       | Amended                  and Restated Articles of Incorporation(1)                                                                                          |
|                 | 10.1      | Asset                  Purchase Agreement with Advantage Autoplex, Inc. and TAB Enterprises,                  Inc.                  dated March 10, 2004(1) |
|                 | 10.2      | Asset                  Purchase Agreement with Advantage Autoplex, Inc. and TAB Enterprises,                  Inc.                  dated March 12, 2004(1) |

----

|                 | 10.3                                           | Loan,                Security and Service Agreement with Oak Rock Financial, LLC dated                March 31, 2003 and amendments thereto(4) |
|--------------------------------------------------------------------------------------------|------------------------------------------------|-----------------------------------------------------------------------------------------------------------------------------------------------------|
|                 | 10.4                                           | Standard                Industrial Lease of Caldwell LaHaye Real Estate Associates dated                November 1, 2004(4)                    |
|                 | 10.5                                           | The                Commercial Lease with Transworld Corporation dated July 1,                2005(4)                                           |
|                 | 10.6                                           | Asset                Purchase Agreement with Gateway Credit Holdings, Inc. dated June 30,                2005(4)                               |
|                 | 10.7                                           | Asset                Purchase Agreement with EPIC Financial Services, Inc. dated June 30,                2005(4)                               |
|                 | 14                                             | Code                of Ethics(3)                                                                                                                    |
|                 | 16.1                                           | Letter                from Clancy and Co., P.L.L.C(2)                                                                                               |
|                 | 31.1        | Principal                Executive Officer Certification under Section 302 of the Sarbanes-Oxley                Act of 2002*                        |
|                 | 31.2        | Principal                Financial Officer Certification under Section 302 of the Sarbanes-Oxley                Act of 2002*                        |
|                 | 32.1        | Principal                Executive Officer Certification under Section 906 of the Sarbanes-Oxley                Act of 2002*                        |
|                 | 32.2        | Principal                Financial Officer Certification under Section 906 of the Sarbanes-Oxley                Act of 2002*                        |

| (1)    | Document                previously filed with the U.S Securities and Exchange Commission                on                August 13, 2004 as an exhibit to our Form 10-QSB and incorporated                herein by reference.             |
|-----------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| (2)    | Document                previously filed with the U.S Securities and Exchange Commission                on                October 22, 2004 as an exhibit to our Form 8-K and incorporated                herein by reference.               |
| (3)         | Document                previously filed with the U.S Securities and Exchange Commission                on                May 12, 2005 as an exhibit to our Form 10-KSB and incorporated herein                by reference.                |
| (4)                   | Document                previously filed with the U.S. Securities and Exchange Commission                on                October 12, 2005 as an exhibit to our Form 10-KSB and incorporated                herein                by reference. |

----

**Item      14.  Principal Accountant Fees and      Services**

|                                                                                                                                                            |   | **Fiscal                2007** |   |   | **Fiscal                2006** |   |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------|--------|--------|--------------------------------|--------|
|                                                                                                                                                            |   |                           |   |   |                           |   |
| Audit                fees                                                                                                                                       |   | $                              | 40,737 |   |                           | $      | 84,520 |   |
| Audit-related                fees                      |   |                           | 0      |   |                           |   | 0 |   |
| Tax                fees                                                                                                                                         |   |                           | 0      |   |                           |   | 0 |   |
| All                other fees                                                                                                                                   |   |                           | 0      |   |                           |   | 0 |   |
| Total                Fees                                                                                                                                       |   | $                              | 40,737 |   |                           | $      | 84,520 |   |

*Audit      Fees.*

*Audit-Related      Fees.*

*Tax      Fees.*

*All      Other      Fees.*

----

| **SIGNATURES** |
|----------------|

|                                                                                                                                                                                          | **AUTO                UNDERWRITERS OF AMERICA, INC.**                                                                     |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|---------------------------------------------------------------------------------------------------------------------------|
|                                                                                                                                                                           |                                                                                                       |
| Date:  October                15,                2007                      | By: /s/                DEAN ANTONIS                                                                                  |
|                                                                                                                                                                                          |      Dean                Antonis                                                                 |
|                                                                                                                                                                                          |       President,                Treasurer and Director                                      |
|                                                                                                                                                                                          |       (Principal                Executive, Financial and Accounting                Officer) |

| **Signature**                                                                                                                                                                                                                                                                                                                                                      | **Title**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    | **Date**                             |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------------|
|                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                 |
| /s/                DEAN ANTONIS                                                                                                                                                                                                                                                                                                                                    | President,                Treasurer and Director                                                                                                                                                                                                                                                                                                                                                                                                                                                             | October                15, 2007      |
| Dean                Antonis                                                                                                                                                                                                                                                                                                                                        |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                 |
|                                                                                                                                                                                                                                                                                                                                                |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |
| /s/                WILLIAM KELLAGHER                                                                                                                                                                                                                                                                                                                               | Executive                Vice President and Director                                                                                                                                                                                                                                                                                                                                                                                                                                                         | October                15, 2007      |
| William                Kellagher                                                                                                                                                                                                                                                                                                                                   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |
|                                                             |                                                                                    |        |
| /s/                MICHELE H. CLARK                                                                                                                                                                                                                                                                                                                                | Secretary                and Director                                                                                                                                                                                                                                                                                                                                                                                                                                                                        | October                15, 2007      |
| Michele                H. Clark                                                                                                                                                                                                                                                                                                                                    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |        |
|                                                                                                                                                                                                                                                                                                                                                               |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |                                 |

----

| **Auto                Underwriters of America, Inc.****Index                to Financial Statements**                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |
|                                                                                                                                                                                   | Page   |
| Report                of Independent Registered Public Accounting Firms                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | F-1    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
| Balance                Sheets as of June 30, 2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             | F-3    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
| Statements                of Operations for the years ended June 30, 2007 and                2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 | F-4    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
| Statements                of Stockholders’ Equity (Deficit) for the years ended                June 30,  2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            | F-5    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |
| Statements                of Cash Flows for the years ended June 30, 2007 and 2006                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                | F-6    |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |
| Notes                to the Financial Statements for the year ended June 30,                2007                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       | F-7    |

----

| **Report                of Independent Registered Public Accounting                Firm** |
|-------------------------------------------------------------------------------------------|

| To                the Board of Directors and Stockholders of |
|--------------------------------------------------------------|
| Auto                Underwriters of America, Inc.            |
| San                Jose, California                          |

----

| **Auto                Underwriters of America, Inc.** |
|-------------------------------------------------------|
| Balance                Sheets                         |
| June                30                                |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | **2007** |        |   | **2006** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|-------------|--------|----------|--------|
|                                                                                                                     |   |     |        |   |     |   |
| Assets:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |     |        |   |     |   |
| Cash                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   | $        | 1,671,430   |   |     | $      | 4,161 |   |
| Finance                receivables,                net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |     | 8,682,178   |   |     |   | 8,430,105 |   |
| Accounts                receivable,                other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |     | 35,572      |   |     |   | 47,022 |   |
| Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |     | 1,507,276   |   |     |   | 285,135 |   |
|                                Deferred financing cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |     | -           |   |     |   | 261,595 |   |
| Prepaid                and other                assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |     | 27,899      |   |     |   | 63,502 |   |
| Property                and equipment,                net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |     | 111,408     |   |     |   | 138,152 |   |
| Total                assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   | $        | 12,035,763  |   |     | $      | 9,229,672 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |     |        |   |     |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |     |        |   |     |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |     |        |   |     |   |   |   |
| Liabilities                and stockholders’ equity:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |     |        |   |     |   |   |   |
| Accounts                payable and accrued                liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | $        | 967,057     |   |     | $      | 1,048,670 |   |
| Drafts                payable and floor plan                liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |     | 1,103,250   |   |     |   | - |   |
|                                Dividends Payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |     | 187,749     |   |     |   | - |   |
| Revolving                credit                facilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |     | 10,086,070  |   |     |   | 9,013,025 |   |
| Other                notes                payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |     | 961,198     |   |     |   | 2,590,695 |   |
| Advances                from related                parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |     | 673,846     |   |     |   | 677,794 |   |
| Deferred                sales                tax                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |     | 523,532     |   |     |   | 794,990 |   |
| Total                liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |     | 14,502,702  |   |     |   | 14,125,174 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |     |        |   |     |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |     |        |   |     |   |   |   |
| Commitments                and contingencies (Note K)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     |        |   |     |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |     |        |   |     |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |     |        |   |     |   |   |   |
| Stockholders'                deficit:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     |        |   |     |   |   |   |
| Preferred                stock: no par,                10,000,000 shares authorized, 2,023,220                issued and outstanding at June 30, 2007.   Liquidation preference                of $5,058,050                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     | 4,253,734   |   |     |   | - |   |
| Common                stock: no par, 100,000,000                shares authorized, 7,040,575                issued and outstanding (6,018,570 at June 30, 2006)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |     | 9,185,229   |   |     |   | 5,768,364 |   |
| Accumulated                deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     | (15,905,902 | )      |     |   | (10,663,866 | ) |
| Total                stockholders' deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |     | (2,466,939  | )      |     |   | (4,895,502 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |     |        |   |     |   |   |   |
| Total                liabilities and stockholders’ deficit                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   | $        | 12,035,763  |   |     | $      | 9,229,672 |   |

| See                accompanying summary of accounting policies and notes to financial                statements. |
|------------------------------------------------------------------------------------------------------------------|

----

| **Auto                Underwriters of America, Inc.** |
|-------------------------------------------------------|
| Statements                of Operations               |
| For                the Years Ended June 30            |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | ** 2007** |              |   | **2006** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------------|-------------------|--------|----------|--------|
|                                                                                                                |   |           |              |   |     |   |
| Revenues:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |           |              |   |     |   |
| Sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   | $              | 9,513,570         |   |     | $      | 11,694,268 |   |
| Interest                income – Finance                Receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |           | 1,495,990         |   |     |   | 1,967,492 |   |
| Other                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |           | 165,706           |   |     |   | 329,805 |   |
| Total                revenues                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |           | 11,175,266        |   |     |   | 13,991,565 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |           |              |   |     |   |   |   |
| Cost                and expenses:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |           |              |   |     |   |   |   |
| Cost                of sales                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |           | 6,423,338         |   |     |   | 9,999,673 |   |
| Selling,                general and                administrative                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |           | 3,896,913         |   |     |   | 3,870,683 |   |
| Provisions                for credit                losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |           | 2,784,267         |   |     |   | 5,056,597 |   |
| Discount                on sale of                loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |           | -                 |   |     |   | 83,744 |   |
| Depreciation                and                amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |           | 313,106           |   |     |   | 295,638 |   |
| Interest                expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |           | 2,265,234         |   |     |   | 1,381,259 |   |
| Total                costs and expenses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |           | 15,682,858        |   |     |   | 20,687,594 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |           |              |   |     |   |   |   |
|              Loss                before income taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |           | (4,507,592        | )      |     |   | (6,696,029 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |           |              |   |     |   |   |   |
| Income                tax benefit (expense)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |           | -                 |   |     |   | 121,676 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |           |              |   |     |   |   |   |
| Net                loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   | $              | (4,507,592        | )      |     | $      | (6,574,353 | ) |
|  Preferred              deemed dividends                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |           | (546,894          | )      |     |   | -  |   |
|  Preferred              dividends accrued                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |   |           | (187,749          | )      |     |   | -  |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |           |              |   |     |   |   |   |
| Net                loss available to common stockholders                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   | $              | (5,242,235 ) |   |     | $      | (6,574,353 | )  |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |           |              |   |     |   |   |   |
| Loss per                share attributable to common stockholders:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |           |              |   |     |   |   |   |
| Basic                and                diluted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   | $              | (0.80             | )      |     | $      | (1.09 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |           |              |   |     |   |   |   |
| Weighted                average number of shares outstanding                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |           |              |   |     |   |   |   |
| Basic                and                diluted                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |   |           | 6,567,092         |   |     |   | 6,054,532 |   |

| See                accompanying summary of accounting policies and notes to financial                statements. |
|------------------------------------------------------------------------------------------------------------------|

----

| **Auto                Underwriters of America, Inc.**                    |
|--------------------------------------------------------------------------|
| Statement                of Stockholders’ Equity (Deficit)         |
| For                the Years Ended June 30, 2007 and                2006 |

|                                                                                                                                                                  |       | ** ** | ** **** **** **** **** ****Common                  Stock** | ** ** | ** ** | ** **** **** ****Series                  A Preferred Stock** | ** **       | ** ** | **Deferred** | ** **       | ** ** | ** **       | **Retained ** | ** ** | ** **             | ** ** | ** ** | ** ** |
|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------|------------|------------|-------------------------------------------------------------------------------------|------------|------------|-----------------------------------------------------------------------------|------------------|------------|--------------|------------------|------------|------------------|--------------------|------------|------------------------|------------|------------|------------|
| ** **                                                                                                                                                            | ** ** | ** ** | **Shares **                                                                    | ** ** | ** ** | ** **                                                                  | **Amount ** | ** ** | ** **   | ** Shares** | ** ** | ** Amount** | ** **         | ** ** | **Compensation ** | ** ** | ** ** | ** ** | **Deficit ** | ** ** | ** ** | ** ** | **Total ** |   |
| Balances                  at June 30, 2005                                                                                                                            |       |       | 6,020,053                                                                           |       |       | $                                                                           | 5,453,878        |       |         |             |       |             |               |       | (230,175               | )          |       |       | (4,052,426 | ) |   |   | 1,171,277 |   |
|                                                                                                                                                                  |       |       |                                                                                |       |       |                                                                        |             |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   |   |   |
| Common                  stock issued for:                                                                                                                             |       |       |                                                                                |       |       |                                                                        |             |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   |   |   |
|  Consulting                  services                                                                                                                            |       |       | 40,000                                                                              |       |       |                                                                        | 170,000          |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   | 170,000 |   |
| Conversion                  of accounts payable                                                                                                                       |       |       | 150,000                                                                             |       |       |                                                                        | 75,000           |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   | 75,000 |   |
| Purchase                  of assets                                                                                                                                   |       |       | 108,517                                                                             |       |       |                                                                        | 162,776          |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   | 162,776 |   |
| Cancellation                  of shares                                                                                                                               |       |       | (300,000                                                                            | )          |       |                                                                        | (150,000         | )          |         |             |       |             |               |       |                   |       |       |       |   |   |   |   | (150,000 | ) |
| Imputed                  interest                                                                                                                                     |       |       |                                                                                |       |       |                                                                        | 40,400           |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   | 40,400 |   |
| Discount                  on unsecured promissory notes                                                                                                               |       |       |                                                                                |       |       |                                                                        | 16,310           |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   | 16,310 |   |
| Recalssification                  of deferred compensation                                                                                                            |       |       |                                                                                |       |       |                                                                        |             |       |         |             |       |             |               |       | 230,175                |       |       |       |   |   |   |   | 230,175 |   |
| Prior                  year adjustment                                                                                                                                |       |       |                                                                                |       |       |                                                                        |             |       |         |             |       |             |               |       |                   |       |       |       | (37,087 | ) |   |   | (37,087 |   |
|                                                                                                                                                                  |       |       |                                                                                |       |       |                                                                        |             |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   |   |   |
| Net                  loss                                                                                                                                             |       |       |                                                                                |       |       |                                                                        |             |       |         |             |       |             |               |       |                   |       |       |       | (6,574,353 | ) |   |   | (6,574,353 | ) |
|                                                                                                                                                                  |       |       |                                                                                |       |       |                                                                        |             |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   |   |   |
| Balances                  at June 30, 2006                                                                                                                            |       |       | 6,018,570                                                                           |       |       | $                                                                           | 5,768,364        |       |         |             |       |             |               |       | -                      |       |       |       | (10,663,866 | ) |   |   | (4,895,502 | ) |
|                                                                                                                                                                  |       |       |                                                                                |       |       |                                                                        |             |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   |   |   |
| Series                  A Preferred shares issued and   1,011,610                  warrants to purchase                    common stock |       |       |                                                                                |       |       |                                                                        |             |       |         |  2,023,220  |       |  4,253,735  |               |       |                   |       |       |       |   |   |   |   | 4,306,096 |   |
| Conversion                  of Secured Notes                                                                                                                          |       |       | 400,000                                                                             |       |       |                                                                        | 700,000          |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   | 700,000 |   |
| Conversion                  of Unsecured Notes                                                                                                                        |       |       | 622,000                                                                             |       |       |                                                                        | 933,585          |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   | 838,477 |   |
| Dividend                  on Series A Preferred   Stock                                                                                                |       |       |                                                                                |       |       |                                                                        |             |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   |   |   |
| Imputed                  interest                                                                                                                                     |       |       |                                                                                |       |       |                                                                        | 40,059           |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   | 40,059 |   |
| Fair                  value of warrants issued in                    connection with debt                                                              |       |       |                                                                                |       |       |                                                                        | 1,185,218        |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   | 1,185,218 |   |
|                                                                                                                                                                  |       |       |                                                                                |       |       |                                                                        |             |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   |   |   |
| Net                  loss                                                                                                                                             |       |       |                                                                                |       |       |                                                                        |             |       |         |             |       |             |               |       |                   |       |       |       | (4,507,592 | ) |   |   | (4,507,592 | ) |
|                                                                                                                                                                  |       |       |                                                                                |       |       |                                                                        |             |       |         |             |       |             |               |       |                   |       |       |       |   |   |   |   |   |   |
| Balances                  at June 30, 2007                                                                                                                            |       |       | 7,040,570                                                                           |       |       | $                                                                           | 8,627,226        |       |         |  2,023,320  |       |  4,253,735  |               |       | -                      |       |       | $          | (15,171,458 | ) |   | $ | (2,073,130 | ) |

| See                accompanying summary of accounting policies and notes to financial                statements. |
|------------------------------------------------------------------------------------------------------------------|

----

| **Auto                Underwriters of America, Inc.**                    |
|--------------------------------------------------------------------------|
| Statements                of Cash Flows                                  |
| For                the Years Ended June 30, 2007 and                2006 |

|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   | **2007** |       |   | **2006** |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------|----------|------------|--------|----------|--------|
| Operating                Activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |       |   |     |   |
|   Net                loss                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   | $        | (4,507,592 | )      |     | $      | (6,574,353 | ) |
|   Adjustments                to reconcile net loss to net cash from                operating activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     |       |   |     |   |   |   |
|     Stock                compensation expense                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     | 11,694     |   |     |   | 20,000 |   |
|     Benefit                of debtors converting debt to equity                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |     | 561,045    |   |     |   | - |   |
|     Amortized                discount on notes payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |     | 78,022     |   |     |   | - |   |
|     Depreciation                and amortization                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     | 313,106    |   |     |   | 295,638 |   |
|      Imputed                interest                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |     | 40,059     |   |     |   | 40,400 |   |
|     Discount                on sale of loans                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |   |     | -          |   |     |   | 83,744 |   |
|     Changes                in finance receivables, net:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |     |       |   |     |   |   |   |
|         Finance                receivable originations and purchased, net of payments                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |     | (2,711,764 | )      |     |   | (7,422,152 | ) |
|         Provision                for credit losses                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |   |     | 2,819,267  |   |     |   | 4,904,157 |   |
|         Inventory                acquired in repossession                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     | 1,792,887  |   |     |   | 3,343,683 |   |
|                Subtotal                finance receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |   |     | 1,900,390  |   |     |   | 825,688 |   |
|     Changes                in operating assets and liabilities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |     |       |   |     |   |   |   |
|         Accounts                receivable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |     | (240,624   | )      |     |   | 1,119,708 |   |
|         Inventory                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |     | (1,222,141 | )      |     |   | 376,217 |   |
|         Deferred                financing cost                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |   |     | 261,595    |   |     |   | (261,595 | ) |
|         Prepaid                and other assets                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     | 35,604     |   |     |   | (11,641 | ) |
|         Accounts                payable and accrued liabilities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |   |     | (81,643    | )      |     |   | 166,560 |   |
|         Deferred                sales taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |     | (271,458   | )      |     |   | 25,483 |   |
|         Income                taxes payable                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |   |     | -          |   |     |   | (121,676 | ) |
|               Net                cash used in operating activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |     | (3,121,943 | )      |     |   | (3,754,232 | ) |
|                                                                                                                |   |     |       |   |     |   |   |   |
| Investing                activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |       |   |     |   |   |   |
|         Purchase                of property and equipment                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |   |     | (7,373     | )      |     |   | (3,564 | ) |
|         Proceeds                from the sale of finance receivables                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |     | -          |   |     |   | 1,146,174 |   |
|                Net                cash provided (used) by investing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |   |     | (7,373     | )      |     |   | 1,142,610 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |       |   |     |   |   |   |
| Financing                activities:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |       |   |     |   |   |   |
|         Net                advances (repayments) from related parties                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |     | (3,948     | )      |     |   | 8,927 |   |
|         Proceeds                from revolving credit facilities, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |     | 1,073,045  |   |     |   | 867,497 |   |
|         Proceeds                from other debt, net                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |   |     | (526,247   | )      |     |   | 1,671,247 |   |
|         Proceeds                from sale of Series A Preferred Stock                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |   |     | 4,253,735  |   |     |   | - |   |
|                Net                cash provided by financing activities                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |   |     | 4,796,585  |   |     |   | 2,547,671 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |       |   |     |   |   |   |
|   Increase                (decrease) in cash and cash equivalents                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |   |     | 1,667,269  |   |     |   | (63,951 | ) |
|   Cash                and cash equivalents at:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |   |     |       |   |     |   |   |   |
|                                                         Beginning                of year                                                                                                                                                                                                                                                                                                     |   |     | 4,161      |   |     |   | 68,112 |   |
|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |   |     |       |   |     |   |   |   |
|                                                         End                of year                                                                                                                                                                                                                                                                                                           |   | $        | 1,671,430  |   |     | $      | 4,161 |   |

----

| **Auto                Underwriters of America, Inc.** |
|-------------------------------------------------------|
| Notes                to Financial Statements          |

**A - Description      of Business and Summary of Significant Accounting Policies**

*Use      of Estimates*

*Concentration      of Risk*

*Cash      and Cash Equivalents*

*Finance      Receivables and Allowance for Credit Losses*

*Inventory*

----

*Property      and Equipment*

| Furniture,                fixtures and equipment | *               * | *5                years* |
|--------------------------------------------------|----------------------------------------------------------------------------------------------|--------------------------|
| Software                                         |                                                                                         | *5                years* |

*Income      Taxes*

*Revenue      Recognition*

*Advertising      Costs*

*Stock      Based Compensation*

----

|                                                                                                                                                                                                                                                                                                                                                                                                                     |                           | **Year                ended****June 30,                2007** |       |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|--------------------------------------------------------------------|------------|
| Net                income / (loss) as reported                                                                                                                                                                                                                                                                                                                                                                           |       | $                                                                  | (4,507,592 | ) |
|   Add:                stock-based compensation determined                under intrinsic value-based                method                                                                                                                                                                                                                                                                           |                           |                                                               | -          |   |
|                                                                      |       |                                                               |       |   |
|   Less:                stock-based compensation determined                under fair value - based                method                                                                                                                                                                                                                                                                             |                           |                                                               | 11,694     |   |
| Pro                forma net loss                                                                                                                                                                                                                                                                                                                                                                                        |                           | $                                                                  | (4,495,898 | ) |
|                                                                                                                                                                                                                                                                                                                                                                                                                     |                           |                                                               |       |   |
| Basic                and diluted net loss per common share:                                                                                                                                                                                                                                                                                                                                                              |                           |                                                               |       |   |
| As                reported                                                                                                                                                                                                                                                                                                                                                                                               |                           | $                                                                  | (0.64      | ) |
| Pro                forma                                                                                                                                                                                                                                                                                                                                                                                                 |                           |                                                               | (0.64      | ) |

*Earnings      Per Share*

*Reclassifications*

*Recently      Issued Accounting Pronouncements*

**B      - Going Concern**

----

| · | Auto                Underwriters currently has a convertible preferred stock offering                underway, which may result in gross proceeds of up to $5 million.                Through                October 2007, Auto Underwriters has raised approximately $250,000                in gross                proceeds under this offering. However, Auto Underwriters cannot predict                with any certainty whether or not it will be successful in raising                additional proceeds beyond that which has been raised to                date. |
|--------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

| · | Auto                Underwriters expects to be able to borrow up to $913,930 under its                LOC                with Oak Rock. |
|--------|-----------------------------------------------------------------------------------------------------------------------------------------|

**C - Finance      Receivables**

|                                                                                                                                                                                                                                                                                                                                                                                                   |                           | **2007** |       |   | **2006**                       |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|----------|------------|--------|--------------------------------|--------|
| Finance                receivables                                                                                                                                                                                                                                                                                                                                                                     |                           | $        | 11,438,028 |   |                           | $      | 10,847,405 |   |
| Less:                allowance for credit losses                                                                                                                                                                                                                                                                                                                                                       |                           |     | (2,755,850 | )      |                           |   | (2,417,300 | ) |
|                                                                   |                           |     |       |   |       |   |   |   |
| Total                                                                                                                                                                                                                                                                                                                                                                                                  |       | $        | 8,682,178  |   |                           | $      | 8,430,105 |   |

|                                                                                                                                                                                                                                                                                                                                                                                                   |                           | **2007** |       |   | **2006**                       |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|----------|------------|--------|--------------------------------|--------|
| Balance                  at beginning of the period                                                                                                                                                                                                                                                                                                                                                    |                           | $        | 2,417,300  |   |                           | $      | 2,323,089 |   |
| Provision                  for asset purchases                                                                                                                                                                                                                                                                                                                                                         |                           |     | -          |   |                           |   | - |   |
| Provision                  for credit losses                                                                                                                                                                                                                                                                                                                                                           |                           |     | 2,819,267  |   |                           |   | 5,056,597 |   |
| Recoveries                                                                                                                                                                                                                                                                                                                                                                                             |                           |     | 1,792,887  |   |                           |   | 3,343,683 |   |
| Net                  charge-offs                                                                                                                                                                                                                                                                                                                                                                       |                           |     | (4,238,604 | )      |                           |   | (8,306,069 | ) |
|                                                                   |                           |     |       |   |       |   |   |   |
| Balance                  at end of year                                                                                                                                                                                                                                                                                                                                                                |       | $        | 2,755,850  |   |                           | $      | 2,417,300 |   |

**D - Accrued      Liabilities**

|                                                                                                                                                                                                                                                                                                                                                                                                   |                           | **2007** |    |   | **2006**                       |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|----------|---------|--------|--------------------------------|--------|
| Accounts                payable                                                                                                                                                                                                                                                                                                                                                                        |                           | $        | 167,616 |   |                           | $      | 289,081 |   |
| Payroll                and related taxes                                                                                                                                                                                                                                                                                                                                                               |                           |     | 523,774 |   |                           |   | 372,641 |   |
| Other                                                                                                                                                                                                                                                                                                                                                                                                  |                           |     | 275,667 |   |                           |   | 386,948 |   |
|                                                                   |                           |     |    |   |       |   |   |   |
| Total                liabilities                                                                                                                                                                                                                                                                                                                                                                       |       | $        | 967,057 |   |                           | $      | 1,048,670 |   |

**E - Debt**

----

| **Lender**                                                                                                                     |   | **Facility****Amount** |       | **Interest****Rate**                                                                                                     |                      | **Maturity**                                                                                                             |                          | **June 30,                2007****Balance** |   |       | **June 30,                2006****Balance** |   |
|--------------------------------------------------------------------------------------------------------------------------------|--------|------------------------|------------|--------------------------------------------------------------------------------------------------------------------------|---------------------------|--------------------------------------------------------------------------------------------------------------------------|-------------------------------|--------------------------------------------------|--------|------------|--------------------------------------------------|--------|
|                       |   |                   |       |                      |                      |                      |                          |                                             |   |       |                                             |   |
| Oak                Rock Financial, LLC                                                                                         |   | $                      | 11,000,000 |                                                                                                                     | Prime                + 7% |                                                                                                                     | March                31, 2008 |                                             | $      | 10,086,070 |                                             |   | $ | 9,013,025 |   |

| **Lender**                                                                                                               |   | **Facility****Amount** |      |   | **Interest****Rate** |   | **Maturity**                                                                                                             |   | **June 30,                2007****Balance** |   |   | **June 30,                2006****Balance** |   |
|--------------------------------------------------------------------------------------------------------------------------|--------|------------------------|-----------|--------|----------------------|--------|--------------------------------------------------------------------------------------------------------------------------|--------|--------------------------------------------------|--------|--------|--------------------------------------------------|--------|
|                      |   |                   |      |   |                 |   |                      |   |                                             |   |   |                                             |   |
| Private                Placement                                                                                         |   | $                      | 990,000   |   |                 |   | 9.25                                                                                                                     | %      | February                2007                     |   | $      | 0                                                |   |   |   | 990,000 |   |
| Private                Placement                                                                                         |   |                   | 1,000,000 |   |                 |   | 10.00                                                                                                                    | %      | August                2006                       |   |   | 50,000                                           |   |   |   | 1,000,000 |   |
| Private                Placement                                                                                         |   |                   | 1,100,000 |   |                 |   | 10.00                                                                                                                    | %      | October                2007                      |   |   | 1,100,000                                        |   |   |   | - |   |

**F - Income      Taxes**

----

|                                                                                                                                                                                                                                                                                                                                                                                                   |                           | **2007** |   |   | **2006**                       |   |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|----------|--------|--------|--------------------------------|--------|
| Income                tax provision                                                                                                                                                                                                                                                                                                                                                                    |                           |     |   |   |                           |   |   |   |
|      Current                                                                                                                                                                                                                                                                                                                                                                  |                           | $        | -      |   |                           | $      | (121,676 | ) |
|      Deferred                                                                                                                                                                                                                                                                                                                                                                 |                           |     | -      |   |                           |   | - |   |
|                                                                   |                           |     |   |   |       |   |   |   |
|                                                                                                                                                                                                                                                                                                                                                                                                   |       | $        | -      |   |                           | $      | (121,676 | ) |

**G - Capital      Stock**

**H - Stock      Options**

*General*

----

*Non-Cash      Compensation Expense*

| Weighted                average estimated value per share | $1.86 |
|-----------------------------------------------------------|-------|
| Expected                option life in years              | 4.0   |
| Weighted                average expected volatility       | 141%  |
| Expected                dividend yield                    | 0%    |
| Weighted                average risk free interest rate   | 54.8% |

*Future      Non-Cash Compensation Expense*

|    **Year                Ended June 30,**                                 |   | **Stock                Option Compensation Expense** |    |
|------------------------------------------------------------------------------------------|--------|------------------------------------------------------|---------|
|                                                                                     |   |                                                 |    |
| 2008                                                                                     |   | $                                                    | 46,522  |   |
| 2009                                                                                     |   |                                                 | 46,395  |   |
| 2010                                                                                     |   |                                                 | 46,395  |   |
| 2011                                                                                     |   |                                                 | 34,574  |   |
| Total                estimated future non- cash                compensation expense |   | $                                                    | 173,886 |   |

*Stock      Option Activity and      Outstanding*

|                                      |   | **Options                Outstanding** |    |   | **Weighted-Average                Exercise Prices** |   |
|-------------------------------------------|--------|----------------------------------------|---------|--------|-----------------------------------------------------|--------|
| Balance                at June 30, 2005   |   |                                   | 50,000  |   |                                                | $      | 0.50 |   |
|                    Granted |   |                                   | 0       |   |                                                |   | 0.00 |   |
| Balance                at June 30,2006    |   |                                   | 50,000  |   |                                                |   | 0.50 |   |
| Granted                                   |   |                                   | 100,000 |   |                                                |   | 2.50 |   |
| Balance                at June 30, 2007   |   |                                   | 150,000 |   |                                                | $      | 1.83 |   |

----

**I - Leases**

| **Years                Ending June 30,**                                                                                                                                                                                        |                           | **Amount** |    |
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|--------------------------------|------------|---------|
|                                        |                           |       |    |   |
| 2008                                                                                                                                                                                                                                 |                           |       | 273,910 |   |
| 2009                                                                                                                                                                                                                                 |                           |       | 175,678 |   |
| 2010                                                                                                                                                                                                                                 |                           |       | 37,172  |   |
| Thereafter                                                                                                                                                                                                                           |                           |       | 0       |   |
|                                                                                                                                                                                                                                 |       | $          | 486,760 |   |

**J - Related      Party Transactions**

**K - Commitments      and Contingencies**

----

**L - Supplemental      Cash Flow Information**

|                                                        |   | **2007** |      |   | **2006** |   |
|-------------------------------------------------------------|--------|----------|-----------|--------|----------|--------|
| Interest                paid                                |   | $        | 1,626,167 |   |     | $      | 1,381,259 |   |
| Income                taxes paid                            |   |     | -         |   |     |   | - |   |
| Common                stock issued to purchase fixed assets |   |     | -         |   |     |   | - |   |
| Notes                issued to purchase fixed assets        |   |     | -         |   |     |   | - |   |
| Common                stock issued to repay debt            |   |     | 1,633,000 |   |     |   | 75,000 |   |
| Common                stock issued to purchase assets       |   |     | -         |   |     |   | 162,776 |   |

**M      – Subsequent Events**